InvestmentsJun 6 2016

‘There are too many players in funds of funds’

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Global asset manager JPMorgan Asset Management (JPMAM) must be one of the few, if not only, investment managers to boast a range of investment trust vehicles in addition to its open-ended fund offerings.

Within the latter range, JPMAM provides exposure to equities, commodities, multi-asset, emerging markets and, until recently, had a multi-manager proposition too.

That can leave it open to accusations it is trying to be all things to all people at a time when specialisation is increasingly valued.

Jasper Berens, head of UK funds at the firm, points out the company’s product range is always under review, which can result in the merger, closure or launch of funds when necessary.

“We are different in the sense we have a larger number of different types of vehicles to put into the marketplace than many of our competitors. Because of that, we are careful to make sure we understand all our products and what we’re trying to do with them,” he says.

“Two years ago, we redefined our sales team and the reason we did that is I took a very strong view post-RDR that the marketplace was changing, and it was changing in a way that made the selection of funds an industry in itself. There were more and more people that had more importance in terms of the selection they were making – whether it was selection into direct-to-consumer propositions, or selections into advisers’ centralised investment propositions or into discretionary management – the whole world was becoming more sophisticated in terms of fund selection.”

I thought the adviser interest in investment trusts would be more rapid than it has turned out to be Jasper Berens, JPMAM

One of the more recent casualties of the firm’s review of its product range has been its multi-manager offering, the Fusion range. Mr Berens admits he failed to recognise the competition in the multi-manager space when the range came to market in March 2013. It was subsequently liquidated in January 2016 with around £54m in assets under management.

“I felt that we had a decent offering to take into the marketplace, but, in the end, the marketplace was changing,” he says. “It’s actually incredibly hard to gain traction in the fund of funds space as a new entrant, albeit a major one in terms of brand and resources, because the market became more competitive.

“I think there are too many players in the fund of funds market and we were last in a long list of firms that were operating in that space, but the established players will continue to do well.”

Focus instead has turned to what he refers to as “building-block” products, whether those are equity or fixed income funds, and to solutions-based products – which is where JPMAM’s multi-asset funds fit in.

He explains: “That may be our Cautious Managed fund, or it may be a fund that’s three years old and we’ve now taken into the market quite strongly, which is our Global Macro Opportunities fund. It used to be called Multi Asset Macro and we changed that at the beginning of this year. That’s where our fund managers will make the asset allocation decisions between equities and bonds and other asset classes, while looking for non-correlated returns in a portfolio.”

In terms of which will be the biggest area of growth for JPMAM in future, Mr Berens believes the growth rate of solutions-based products will be bigger than that of building-block products.

“One of the things you can’t build from a passive perspective is the ability to asset allocate,” he states. “In my view, that is the great paradox of people who are building portfolios entirely through passive, using passive building blocks: in the end you are going to have to asset allocate around those passive building blocks and, by definition, you are then becoming an active fund manager in terms of how you’re selecting those passive portfolios.”

Other ranges face different challenges. With the advent of the RDR, along with the ability to compare open- and closed-ended vehicles on a like-for-like basis, came an expectation there would be greater take-up of investment trusts by the adviser community.

Mr Berens observes there have been two major changes: investment managers are now part of the value chain, not the owners of the value chain; and the greater sophistication of advisers generally is leading to an increased level of interest in investment trusts.

“What you are seeing is the adviser having historically never looked at investment trusts – they never needed to because there was no trail in the investment trust system,” he says. “Now they’re growing in sophistication there may be products and services within the investment trust world that you can’t get in open-ended funds.”

But he concedes: “I thought the adviser interest in investment trusts would be more rapid than it has turned out to be.”

He is not that surprised, however, on the basis that asking advisers to look at several hundred trusts on top of the thousands of funds already available “is asking quite a lot of them”.

Yet, he asks: “If you’ve got an Oeic fund and an investment trust that are run by the same fund manager but the trust is on a 20 per cent discount in its net asset value to price, why wouldn’t you consider the investment trust for your clients?”

Instead, he thinks it will take at least a decade before there is a growing trend for the broader adviser market to buy closed-ended funds.

CV

2012-present Head of UK funds, JPMorgan Asset Management

2005-2012 Head of UK sales, JPMorgan Asset Management

2001-2005 Head of asset management sales, JPMorgan Fleming Asset Management

1997-2001 Sales manager, Fleming Asset Management

1993-1997 Sales support executive, Hambros Fund Management

Nevertheless, Mr Berens heralds a “golden era” for investment advice. With that in mind, though he remarks JPMAM holds a strong position in both the advisory and discretionary markets, he has his sights set firmly on establishing more of a presence in the former.

“For two decades we’ve been strong in the discretionary space and our product offerings have always been targeted at the discretionary space. But in the past decade we’ve been growing our market share in the adviser world, and that’s an area I want to continue to grow.

“For instance, our ‘market insights’ capability, particularly the guide to markets with Stephanie Flanders at the head of that, has been aimed at us growing our credentials in the adviser marketplace and that’s exactly where we want to be.”

According to figures from JPMAM, these events are engaging increasing numbers of UK advisers. Ms Flanders, chief strategist for Europe, hosted a conference call in January with more than 700 clients listening, the asset manager’s largest ever UK attendance, up from just 273 clients in the first quarter of 2014 and an increase on the 610 clients who listened a year earlier.

Mr Berens explains the market insights help inform advisers about “what’s happening in the marketplace and in economics” so they can communicate this to their own customers.

“Because if I go to my financial adviser and they don’t have a view on the market, I want to know why not,” he adds. “And that, in the end, is what is incredibly valuable about the market insights programme. If we can provide value in our portfolios to advisers, but on top of that we can provide value as an asset manager in helping the adviser with their insights, not only for their portfolios but in their communication and discussions with the clients that are paying their salaries, that is a big thing.”

Mr Berens is hopeful when turning to regulation, specifically the issue of the ongoing FCA review into the asset management industry.

“I really hope that one of the outcomes from this is to ensure we have a competitive industry, to make sure that we have an industry that continues to work as well as it has done. But, critically, [that it] continues to be innovative and always thinking about its responsibilities to investors, either directly in our funds or more widely in our industry, and I think that’s going to be the best-possible outcome for this review.”